2006 Half Year Results September 2006 NOT FOR DISTRIBUTION IN THE - PowerPoint PPT Presentation

2006 Half Year Results September 2006 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Admiral Is STILL Different H1 2006 � Highly Profitable a � Fast Growing a � Low Risk Profits a � a Strongly Cash Generative 2 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

� Our Results � The Market � The Future 3 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Our Results

Financial Highlights � Pre-tax profit up 24% at £68.7 million (H1 2005: £55.6 million) � Aggregate group turnover up 12% at £359.2 million (H1 2005: £319.3 million) � Active policies up 10% to 1,161,000 from H1 2005 � Earnings per share 18.5p (2005: 15.2p) � Interim dividend of 12.1p per share, total dividend of £31m (H1 2005: Interim dividend of 9.7p per share, total dividend of £25m) 5 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Fast Growing m) (1) (1) Historical Revenue Growth (£ £m) Historical Revenue Growth ( £638m £548m £427m £379m £323m £263m £207m £150m £120m £100m £73m £47m £18m £359m 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 £319m £269m H1 04 H1 05 H1 06 (1) Revenue comprises total premiums written + gross other income + allocated investment income 6 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Highly Profitable Profit before tax (£ £m) m) Profit before tax ( £68.7m £119.5m 19% £55.6m £98.1m £74.0m £47.4m 15% 25% £50.3m £33.3m 30% 11% 66% 17% (2) (1) 2001 2002 2003 2004 2005 64% 53% Profit commission Non-underwriting result Underwriting result (2) H1 04 H1 05 H1 06 (1) £6m Munich Re profit commission re-alllocated from 2004 to 2003 result. (2) Figures up to 2004 also adjusted for goodwill amortisation, ESOT transactions and bonuses in lieu of dividends. 7 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Underwriting Result £14.7m 87% 87% £14.4m 78% £13.4m Reserve release £9.8m Profit commission £9.6m Investment return £3.7m H1 04 H1 05 H1 06 H1 04 H1 05 H1 06 Underwriting Profit Combined Ratio 8 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Growing Ancillary Income m) (1) (1) Motor Policies Sold and Renewed Motor Policies Sold and Renewed Ancillary Contribution (£ £m) Ancillary Contribution ( 1,280 1,155 881 712 643 £72.5m £59.2m H1 05 H1 06 2003 2004 2005 Ancillary Contribution per Policy Sold (1)(2) (1)(2) Ancillary Contribution per Policy Sold £44.7m £40.1m £36.0m £56.6 £55.9 £56.2 £51.2 £50.7 2005 H1 05 H1 06 2003 2004 H1 05 H1 06 2003 2004 2005 (1) Before allocation of overhead expenses (2) Includes new business and renewals, before cancellations 9 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Confused.com Quotes Profit £8.7m 3.8m 1.7m (1) £2.9m 0.5m (1) £0.7m H1 04 H1 05 H1 06 H1 04 H1 05 H1 06 (1) Confused profit includes revenue from Group brands. The 2004 and 2005 figures have been adjusted for comparative purposes. 10 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Earnings per share (eps) 32.7p (1) 25.6p (1) 16.8p +22% +22% 18.5p 2003 2004 2005 15.2p 13.2p H1 04 H1 05 H1 06 (1) The earnings per share figures for 2003 & 2004 have been adjusted for the £6m profit commission and £4m ESOT credit 11 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Strongly Cash Generative - Dividend £m Total equity 192 As at 30 June 2006 Goodwill (62) Solvency capital (74) 56 Normal dividend 45% of post tax profits Normal dividend 8.4p (21) Buffer (25) Special dividend 3.7p 10 Total Interim dividend = £31m 12.1p per share (H1 2005 9.7p) Ex dividend 20 September 2006 Record date 22 September 2006 Payment date 18 October 2006 12 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Highly Profitable (1) Expense Ratios (1) Expense Ratios 28% 28% 27% 27% 28% Market (2) 27% 22% Admiral (3) 18% 15% 16% 15% 15% 15% 2000 2001 2002 2003 2004 2005 H1 2006 Total Market (Earned Basis) Admiral (Earned Basis) (1) Including claims handling expenses (2) EMB analysis of FSA returns for total UK motor market (3) Adjusted to exclude non-recurring expenses such as Lloyd’s costs and 2.5% non-recurring expense commission; based on net earned premiums before stop loss costs of £911,000 in 2001 and £607,000 in 2002 13 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Highly Profitable (1) (4) Expense Ratios (1) Loss Ratios (4) Expense Ratios Loss Ratios 85% 28% 28% 27% Market (2) Market (5) 27% 28% 78% 81% 78% 27% 77% 75% 22% 75% Admiral (7) Admiral (3) 72% 18% 69% 15% 16% 15% 15% 63% 15% 51% 54% 54% 2000 2001 2002 2003 2004 2005 H1 2000 2001 2002 2003 2004 2005 H1 06 (6) 2006 Total Market (Earned Basis) Total Market (Earned Basis) Admiral (Ultimate Best Estimate at June 06) Admiral (Earned Basis) (1) Including claims handling expenses (4) Excluding claims handling expenses (2) EMB analysis of FSA returns for total UK motor market (5) EMB analysis of FSA returns for UK private motor market (3) Adjusted to exclude non-recurring expenses such as Lloyd’s costs and 2.5% non-recurring (6) 2000 earned loss ratio includes claims incurred and premiums earned in 2000 on business written expense commission; based on net earned premiums before stop loss costs of £911,000 in 2001 in 1999 underwriting year and £607,000 in 2002 (7) Actuarial best estimate of ultimate outcome based on actuarial analysis 14 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Combined Ratio Advantage over Market 120 Market 109% 110 113% 106% 104% 105% 100 102% Admiral Admiral Combined ** 90 87% 91% Market Combined 80 78% (Pure Year Basis) * 72% 70 70% 66% 60 50 2000 2001 2002 2003 2004 2005 * EMB analysis – Private motor market loss ratio plus overall motor market expense ratio, excludes back year reserve movement ** Actuarial best estimate of ultimate outcome 15 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

The Market

Where Is The Market ‘Currently’ Combined Ratios (% premium)* Reported Pure Year 109 105 103 102 102 101 2003 2004 2005 2003 2004 2005 * UK motor market, EMB analysis 17 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Growing claims cost per vehicle year Frequency (%) -1.9% - 1.9% 17.7 17.5 17.4 16.9 Cost per Vehicle Year (£) 16.5 15.9 % % 7 7 . 2 . 2 303 + + 289 '00 '01 '02 '03 '04 '05 287 276 275 266 Average Claims (£) +4.6%% +4.6%% 1906 1740 1710 1586 '00 '01 '02 '03 '04 '05 1554 1520 '00 '01 '02 '03 '04 '05 Source: EMB Analysis of FSA Returns for Private Car Comprehensive Market 18 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Market Currently Loss-Making Reported Pure Year 114 Major players struggling: 111 109 2005 2005 Reported Pure Year 105 103 NU 104% 106% 102 102 101 RBS 104% 111% 2003 2004 2005 2006F Source: EMB Analysis of FSA Returns, private motor expense ratio and private motor loss ratio 19 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

When Will Prices Increase Substantially? – Importance of Releases Motor Results Reserve Releases (Net) 8 Effect on bottom line NEP % 6 £m 4 2 0 -2 -4 82 84 86 88 90 92 94 96 98 '00 '02 '04 Source: Deloitte Motor Seminar 2005, Nielsen 20 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Marketing Spend Signals Forthcoming Turn Rolling 12-month cumulative TV and press spend (£m) (1) 140 120 100 80 60 40 20 0 Dec ’94 Dec’95 Dec ’96 Dec. ’97 Dec’98 Dec ’99 Dec ’00 Dec ’01 Dec ’02 Dec ’03 Dec ’04 Dec ‘05 May ‘06 (1) A C Nielsen 21 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.

Continued Exuberance Guardian private motor Axa/Guardian motor premium earned premium earned 99 150 +60% 97 -45% Combined Ratio % 140 95 04 130 120 Guardian/Axa Combined* 110 (10 yr average = 120%) 100 Market Combined (10 yr average = 110%) 90 80 Axa announce intention to grow 70 private motor 60 5 6 7 8 9 0 1 2 3 4 6 9 9 9 9 9 0 0 0 0 0 0 9 9 9 9 9 0 0 0 0 0 0 1 1 1 1 1 2 2 2 2 2 2 * 95-97, Guardian Private Motor, 98 onwards Axa/Guardian Motor Sources: Smith New Court; EMB analysis 22 NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO A U.S. PERSON OR IN CANADA OR JAPAN.